Legg Mason sides with Yahoo

Yahoo has received a key endorsement in its battle with Carl Icahn

One of Yahoo's major investors has pledged support for the company's board of directors.

Capital management firm Legg Mason said that it will vote in favour of retaining the current board at next month's shareholder meeting.

Legg Mason owns some 60.7 million shares of Yahoo stock, giving it a 4.4 per cent stake in the company.

"We have met with representatives of the current board and management, including founder Jerry Yang, several times," said Legg Mason chairman and chief investment officer Bill Miller.

"We believe the current board acted with care and diligence when evaluating Microsoft's offers."

The announcement puts Legg Mason at odds with investor Carl Icahn, who will attempt to oust the board at the meeting and replace it with a group which promises to facilitate a sale of some or all of the company to Microsoft.

While Legg Mason is backing the board, Miller also expressed hopes that the two sides could reach a compromise.

"We would prefer that the company and Mr Icahn reach a mutual agreement on the composition of the board and end this disruptive proxy contest," he said.

Miller also did not rule out his company's approval of a possible sale to Microsoft, either through Icahn's board or Yahoo's current board. Microsoft has said that it cannot negotiate with Yahoo's board as it stands.

"If Microsoft wants to acquire Yahoo, it can make the terms and conditions of its offer public," said Miller. "If Yahoo shareholders support it, I am confident the board of Yahoo will accept it."